Alphanumeric Department/Subsidiary Codes

Alphanumeric codes are used to designate departments and subsidiaries within a chart of accounts. These codes are usually a contraction of a department or subsidiary name, which makes them easier for an accounting clerk to remember. For example, the name of a department can be contracted into a three-digit code, such as ACC for the accounting department or MAR for the marketing department. In short, using alphanumeric coding allows for the use of account codes that have unique meanings, and which are therefore less likely to be coded incorrectly into the accounting system.

Advantages of Alphanumeric Department/Subsidiary Codes

The use of alphanumeric coding is much easier for employees to remember than the more traditional numeric coding for departments and subsidiaries. After all, would you rather remember that the accounting department is code 300, or code ACC? When an accountant using a traditional numeric coding technique mistakenly codes a transaction to the wrong account, it can take a substantial amount of time - usually by a senior accountant - to find and correct the problem. This issue would likely never have arisen if an alphanumeric system had been used instead.

Example of Alphanumeric Department/Subsidiary Codes

Gripe Corporation has a number of operating divisions, including the Complain, Moan, Groan, and Whine divisions. Since all four divisions do essentially the same thing, the accounting clerks are constantly coding transactions to the wrong divisions. To fix the situation, the controller mandates that a separate two-letter code be assigned to each division, thereby more clearly identifying each one. This results in the following codes:

Complain Division = CO (formerly code 110)
Moan Division = MO (formerly code 120)
Groan Division = GR (formerly code 130)
Whine Division = WH (formerly code 140)

For example, when the Whine division incurs an expense for its legal activities (account code 500), the payables clerk codes the invoice to account WH-500, which is more easily remembered than the previous numeric account code for the division, which was 140.